Global Mergers and Acquisitions in 2023

Global mergers and acquisitions are complicated, nuanced procedures that involve many stakeholders. They can be filled with pitfalls. They can also transform companies and accelerate growth.

The global M&A industry saw its lowest level in 10 years in 2023 as investors grew increasingly concerned about the impact of rising rates, geopolitical tensions, and other factors. (See Chart 1). However, some experts anticipate that activity to increase in 2024, as some of these headwinds diminish.

One reason for this optimism is the fact that a backlog of assets is expected to come to market in 2024. In recent years, a lot of private equity (PE), portfolio companies haven’t sold due to decreasing valuations. This will create opportunities for strategic buyers to acquire undervalued assets.

The closing of the cycle of interest rate increases and a recovery on the stock market will also increase the availability of financing with debt to purchase. This will reduce transaction costs and speed up the time to complete deals. M&A will also be used by more companies in order to mitigate geopolitical risks and expand into new markets, industries or revenue streams.

In the second half of 2023, a number structured transactions were completed. These included the sale of minority stakes as well as earnouts — arrangements that will require the buyer to pay the full amount of the deal in the event that certain operational or financial milestones are met following the closing. This trend will likely to continue as acquirers attempt to align incentives and bridge the gap in their valuations.

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